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Posted on: May 15, 2019

Hospital Property Tax Bill Up For Review

On May 16, the Assembly State and Local Government Committee will be considering A-4013, a bill which the League opposes. A-4013 seeks to address the ongoing issue of property tax exemptions for nonprofit hospitals with on-site for-profit medical providers. The issue stems from a tax court decision which brought to light how the business model for modern hospitals does not comport with the original public policy reasons for exempting non-profit hospitals from property taxes.

While the League is supportive of a legislative solution to this issue, we do not believe that A-4013 provides a proper solution. As a threshold matter, the bill sets up an unconstitutional tax exemption. Notwithstanding the constitutional issues, A-4013 poses other concerns as it attempts to create a Community Service Contribution (CSC) fee which would be paid by hospitals organized as non-profits in lieu of any property tax. The CSC fee is calculated based on the amount of licensed acute-care beds in a hospital which, based on industry trends, would mean the fee would be reduced each year as hospitals move away from these types of beds.

The contemplated CSC fee would be far smaller than any property tax bill which these hospitals would otherwise be subject to. Effectively, serving as a subsidy to an otherwise profitable industry, paid for by all other property taxpayers of host communities.

Further, A-4013 would preempt settlements and agreements some host municipalities have already made with hospitals in their communities. And, A-4013 would also seek to reimburse these hospitals for any payments they may have already made to municipalities under these agreements.